Silicon Valley WiFi network finally gets funding for pilot

Covad has decided to fund a one-square-mile pilot WiFi network in Silicon …

An ambitious but troubled WiFi network for Silicon Valley is getting a shot in the arm from a couple of companies, but there remains some skepticism over whether the project will prove to be viable in the end. Covad Communications, best known for its DSL service, has agreed to join forces with Cisco Systems to build a pilot network in the town of San Carlos. But the investment may come with a twist: Covad will target business and government customers, not consumers.

Covad and Cisco's test network will be a small one—just one square mile in size. If it turns out to be successful in terms of coverage and subscriber uptake, Covad could become the engine driving the network's expansion towards its original goal of covering a 1,500-square-mile area.

If you think that sounds like an expensive proposition, you're correct. The cost for the project has been pegged at anywhere from $100 million to $200 million. As we reported last fall, the network's backer, Wireless Silicon Valley, was having a hard time finding a company willing to fork over a measly $500,000 for the pilot network.

Covad's backing means that the pilot will move forward, but unfortunately for those with visions of free 802.11b/g blanketing the entire valley, Covad will offer its network only to businesses and governments. "We want to bite off what we can make money on," Dave McMorrow, general manager of Covad Wireless, told the San Jose Mercury News.

Given the poor track record of municipal networks around the country, focusing on businesses and the public sector makes sound sense. In the time since municipal WiFi networks were first envisioned half a decade ago, changes in the broadband marketplace have made such networks a less attractive proposition to consumers. DSL is available for as little as $10 per month, and these days, there are generally a plethora of free and low-cost WiFi networks available if you find yourself in need of an hour or two of 'Net access.

Indeed, the municipal WiFi market is in such dire shape that EarthLink—once its biggest commercial backer—has hung a "for sale" sign on its muni WiFi business. A number of cities have scaled back or canceled planned networks, while cities like Philadelphia that have pressed ahead with their plans have discovered that providing adequate coverage is a very expensive proposition.

Covad's decision to pilot WiFi connectivity only to businesses and governments seems to be a sound one at this point. Industry analyst Craig Settles has told Ars that there's no money to be made in consumer-centric municipal WiFi networks, arguing that the only initiatives with a chance of success are those where local governments are going to be one of the main users. "There is a lot of interest among governments in making the business case for getting a network that will serve primarily mobile government workers and asset management, plus key constituent groups such as the medical and university communities," Settles said.

Covad's decision has moved the Silicon Valley network off of life support, but it's still in the intensive care ward. And even if the patient makes a full recovery and is discharged, it will emerge in markedly different form. Even if the project makes it past the pilot phase, by the time it approaches anything near the original 1,500-square-mile vision, it will have plenty of competition from WiMAX and possibly even LTE and "white space" broadband.